In today’s briefing:
- Rakuten Bank (5838) One Month Later
- Toyo Construction (1890 JP): YFO’s Potential Revised Offer at JPY1,255
- Kokusai Electric IPO: The Bull Case
- Disco (6146 JP): Rolling Over
- Ryobi (5851) | Re-Rating as Die-Casting Becomes Gigacasting
- Japan Consumer Staples Update: Inflation Looks a Blessing in Disguise for Those with Pricing Power
- Need to Increase Human Capital Investment as Soon as Possible to Move to High Value-Added Businesses
Rakuten Bank (5838) One Month Later
- On 31 August, I published Rakuten Bank (5838) – 4 Months On, Volume Decay and RB’s Place Among Banks. It’s up 40.6% since the day after I wrote, reasons unclear.
- TOPIX Banks Index is up 10.4% since then, with post-BOJ meeting price movements indicating a kind of momiai.
- For Rakuten Bank, while growth means it may not be “expensive” it is no longer dirt cheap. And I cannot identify the culprit, so time to take profits.
Toyo Construction (1890 JP): YFO’s Potential Revised Offer at JPY1,255
- YFO has returned with a potential tender offer price of JPY1,255 per share for Toyo Construction (1890 JP), 25.5% above its previous offer of JPY1,000 per share.
- The offer is conditional on due diligence access to confirm the feasibility of the medium-term management plan and no material accounting, tax, or legal issues.
- The due diligence will take a month, with the offer expected to commence in late December. Expect due diligence access as the revised offer represents a 10-year high.
Kokusai Electric IPO: The Bull Case
- Kokusai Electric (6525 JP) is a speciality manufacturer of semiconductor production equipment. KKR & (KKR US) seeks to raise about US$750 million through listing Kokusai.
- Kokusai has the leading market share in the batch deposition equipment market and the second largest market share in the treatment equipment market, according to TechInsights and Gartner.
- The key elements of the bull case rest on a leading market share, strong IP, healthy forward revenue indicators, increasing recurring service revenue, solid gross margin trends and modest leverage.
Disco (6146 JP): Rolling Over
- After more than doubling between early April and the end of August, Disco has dropped back. The outlook for demand and valuations suggest potential downside of 20%.
- Operating profit was down 21% YoY in the June quarter on a 10% decline in sales. Management is guiding for 18% and 32% declines this quarter.
- Over-Optimistic expectations regarding the pace and degree of cyclical recovery are being squeezed out of the share price.
Ryobi (5851) | Re-Rating as Die-Casting Becomes Gigacasting
- Ryobi is a global manufacturer of high-quality aluminum die castings used for transmission cases, engine parts, and other vehicle parts
- Ryobi has recently gained market attention following an announcement that the company will produce large electric-vehicle body parts using “gigacasting”
- The stock is expected to benefit from EV adoption with improved earnings and increased market recognition
Japan Consumer Staples Update: Inflation Looks a Blessing in Disguise for Those with Pricing Power
- Japanese inflation, which peaked at 4.3% in January 2023, gradually decreased to 3.5%, 3.2%, 3.3%, 3.3%, and 3.2% in the subsequent months of 2023.
- Inflation rates remained stable for most items, excluding Fuel, Electricity, Water, and fresh vegetables, indicating the persistence of cost-push inflation.
- In this insight, we analyze the recent quarterly performance of Yakult, Nissin, and Seven & I, Japanese Consumer Staples companies discussed in our prior Smartkarma Original.
Need to Increase Human Capital Investment as Soon as Possible to Move to High Value-Added Businesses
- The question is whether companies can achieve results by increasing investment to secure and train human resources who can contribute to transitioning to a business that produces high value-added products.
- Regarding the disclosure of human capital, many issues remain, such as the lack of unified definition of the required items and the inability to use this data as comparable data.
- Percentage of women in managerial positions is more serious. The lack of on-the-job training for women is an on-going issue that makes the path to future managerial positions more difficult.
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